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Class Action Against State of Michigan: Taxation of State Pensions (Okrie vs State of Michigan)
Update July 17, 2014
Over one week ago, on July 8, oral argument was held before a special session of the Michigan Court of Appeals (Judges Hoekstra, Beckering, Fort-Hood) on whether the Michigan Legislature’s passage of 2013 PA 164, which was signed into law by Governor Snyder on November 13, 2013, transferring the Court of Claims to the Court of Appeals, was unconstitutional in violation of the separation of powers doctrine under the Michigan Constitution and the Due Process Clauses of the state and federal constitutions. For the oral argument, I primarily confined my presentation to the separation of powers argument; on rebuttal, I addressed the due process argument. We now await a decision from the Court of Appeals.
In what follows, I have reproduced (for those who are interested) much of what I prepared to say about the separation of powers argument for the oral argument, only some of which I was able to deliver directly or in response to the Court’s questions in the limited time available. As always, I would like to make an appeal for financial contributions, in any denomination, to enable me to continue with these cases in our appellate courts, and, if necessary and possible, the United States Supreme Court. My thanks in advance for any help that you can provide and a special thanks to all those who went to the trouble and expense to attend the oral argument. It was much appreciated.
First, as the point of departure for deciding the separation of powers question, I asked the Court to begin by interpreting the text of the constitutional provisions at issue, Art 3, § 2, Article VI, § 1, § 8 and § 10 of the 1963 Michigan Constitution.
Article III, § 2, Separation of powers of government, provides:
The powers of government are divided into three branches: legislative, executive and judicial. No person exercising powers of one branch shall exercise powers belonging to another branch except as expressly provided in this constitution.
Article VI, § 1, Judicial power in court of justice; divisions, provides:
The judicial power of the state is vested exclusively in one court of justice which shall be divided into one supreme court, one court of appeals, one trial court of general jurisdiction known as the circuit court, one probate court, and courts of limited jurisdiction that the legislature may establish by a two-thirds vote of the members elected to and serving in each house.
Article VI, § 8, Court of appeals; election of judges, divisions, provides:
The court of appeals shall consist initially of nine judges who shall be nominated and elected at non-partisan elections from districts drawn on county lines and as nearly as possible of equal population, as provided by law. The supreme court may prescribe by rule that the court of appeals sit in divisions and for the terms of court and the times and places thereof. Each such division shall consist of not fewer than three judges. The number of judges comprising the court of appeals may be increased, and the districts from which they are elected may be changed by law.
Article VI, § 10, Jurisdiction, practice and procedure of court of appeals, provides:
The jurisdiction of the court of appeals shall be provided by law and the practice and procedure therein shall be prescribed by rules of the supreme court.
For interpreting the constitution, the Michigan Supreme Court, as reaffirmed in the recently decided case of Makowski v Governor, slip op, p 6; quoting Soap & Detergent Assn v Natural Resources Comm, 415 Mich 728, 745 (1982), has developed two rules of construction.
First, the interpretation should be “the sense most obvious to the common understanding; the one which reasonable minds, the great mass of the people themselves would give it, in ratifying the proposed 1963 Constitution. Thus, we look to the common understanding of the voters in the April 1, 1963 election who ratified the proposed Constitution that was presented to them after the Constitutional Convention of 1961 and 1962.
Second, we consider “the circumstances surrounding the adoption of the constitutional provisions at issue and the purpose sought to be accomplished.” To this end, this Court looks to the debates in the Constitutional Convention record and related contemporaneous documents published about the proposed Constitution. While the Constitutional Convention record and the contemporaneous documents about the proposed Constitution are not controlling or determinative, they may be considered to be “illuminating, affording a sense of direction.” Makowski, supra, quoting from House Speaker v Governor, 443 Mich 560, 581 (1993).
The sense most obvious to the common understanding of these Articles (Art. III, sec. 2 and Art. VI, secs. 1 and 10) is that what was created in the 1963 Constitution was an integrated judicial structure (“one court of justice“), which is divided into separate and distinct levels of judicial administration, with the newly-created Court of Appeals having constitutional status as an intermediate appellate court between the Supreme Court and circuit courts and other trial-level courts -- probate courts, and legislatively created courts of limited jurisdiction. Thus, the 1963 Constitution confers appellate jurisdiction upon the Court of Appeals, with the Legislature given the power to enact statutes (i.e., provide by law), which specify the scope of the Court of Appeals’ appellate jurisdiction, and with the Supreme Court conferred the power to provide the rules of practice and procedure of the Court of Appeals. What stands out prominently is that the 1963 Constitution created the Court of Appeals as an intermediate appellate court, conferring upon it appellate jurisdiction, authorizing the Legislature to implement that appellate jurisdiction and the Supreme Court to provide the rules of practice and procedure for this Court.
This common understanding of these Constitutional provisions is thoroughly supported by the circumstances surrounding the adoption of the constitutional provisions at issue and the purpose sought to be accomplished. Specifically, this common understanding was made clear to the people of Michigan by their elected delegates to the Constitutional Convention of 1961-1962 in the Address to the People, which was distributed to all the voters before the election and which recognized that one of the major points of the Convention was “a desire to strengthen, each in its proper sphere, the three co-ordinate branches of state government — executive, legislative and judicial.” Address, p 3. As to the Judicial Branch, the Address stated that one of the changes was a “unified state court system” that established a “New Court of Appeals,” an intermediate appeal court of nine elected justices immediately below the supreme court to promote the speed and administration of state justice.” Address, pp 6-7.
More specifically, the Address noted that Article VI, § 1, “creates a ’court of justice,’ incorporating the concept that the state has a single court with several divisions, each devoting its attention to a certain level of judicial administration.” The Address further noted that Article VI, § 1 “creates an intermediate appellate court between the circuit courts and the supreme court,” and that “[s]uch a court would share part of the present work of the supreme court and becomes necessary, it is believed, because of a mandate in Article 1 (§ 20) of this new document which grants an appeal as a matter of right in criminal cases. ” Address, p 55. The Address also provides that Article VI, § 10 is “a new section providing that jurisdiction of the court of appeals shall be established by the legislature. Practice and procedure are to be provided by rules of the supreme court.”
The Address to the People crystalized the efforts of the delegates in formulating the proposed Constitution. This is spelled out in the Citizens’ Advisory Committee Report on “The Judicial Department,” which was prepared for Governor John B. Swainson in September 1961. Specifically, it notes that the proposed new judicial article (Article VII) for the Judicial Department “would add an intermediate Court of Appeals to our Judicial structure” and “lay the groundwork for a unified Court system,” and that “[t]here is, under the present Constitution and statutes, a very diversified Court structure.” (CAC Report, p 1). As for the Jurisdiction of the Court of Appeals, the CAC Report stated that the proposed Article VII, § 9 would provide the following.
The Court of Appeals shall have no original jurisdiction, except that it may be authorized by rules of the Supreme Court to review directly decisions of administrative agencies of the State and it may be authorized by rules of the Supreme Court to issue prerogative writs either as original jurisdiction or as necessary and appropriate to its appellate jurisdiction. In all other cases, it shall exercise appellate jurisdiction under such terms and conditions as the Supreme Court shall by rule prescribe. Such rules prescribe authority for the Court of Appeals to review and revise sentences in criminal cases.
The Comment provides:
The proposed draft assumes that the Court of Appeals shall be the final Court of appellate jurisdiction in all cases except those which the Supreme Court chooses to review. It also assumes that the Supreme Court may grant jurisdiction to the Court of Appeals to review directly decisions of administrative agencies in the State. It also assumes that the Supreme Court can and will authorize the Court of Appeals to issue prerogative writs, either as original jurisdictions or as necessary for tis appellate jurisdiction. It leaves to the Supreme Court the power to prescribe the scope of the appellate jurisdiction. This is consistent with the earlier section which theoretically gives the Supreme Court power to indicate where appeals shall lie from each Court of original jurisdiction. (CRC Report, p 13).
The circumstances surrounding the adoption of the constitutional provisions at issue and the purpose sought to be accomplished are also addressed in many contemporaneous analyses by the Citizen Research Council of Michigan. For example, in its Memorandum No. 202, issued in October 1961, The State Constitution: Its Nature and Purpose by Mr. Paul Kauper provides in pertinent part the following about the Judiciary:
ere the important questions relate to the organization of the judicial department; the structure of the court system; . . . and the general authority of the Michigan Supreme Court in respect to such matters as rule making and the supervision of the lower courts. A primary consideration that affects a number of these questions is to assure as far as practicable by constitutional means the independence of the judiciary. An important problem requiring attention is whether the judicial system (the types of courts and their respective jurisdictions) shall be spelled out or whether the constitution shall outline the general structure and vest power in the legislature to fill in the details. (Memorandum, p 18).
In the Conclusion, the Memorandum notes:
The constitutional convention of 1961 will not be starting from scratch. The state of Michigan has an extended constitutional history and tradition that began with the adoption of the first constitution in 1835. Any revised constitution must keep faith with the adoption of the first constitution in 1835. Any revised constitution must keep faith with the past and with what has been determined by experience to be the enduring values of a government resting on the consent of the people . . . (Memorandum, p 25).
Prior the election on April 1, 1963 in which the proposed new state constitution was to be ratified or rejected by the state voters, the CRC also issued An Analysis of the Proposed Constitution (No. 2) on December 17, 1962. One of the major changes that it noted was that “a new feature guarantees an appeal as a matter of right in all criminal prosecutions.” (CRC Analysis, No. 2 , p 1). The CRC also issued An Analysis of the Proposed Constitution (No. 6) on December 28, 1962 as to The Judicial Branch. It noted:
The proposed constitution makes the following major changes with respect to the judicial article:
The Analysis specifically observed:
Under the proposed constitution, the state judicial power is “vested exclusively in one court of justice” — divided into the supreme court, the court of appeals, the circuit court (designated as a trial court of general jurisdiction), the probate court, and “courts of limited jurisdiction” which may be established by law for which a two-thirds vote of the legislature is required. . . .
The intermediate court of appeals provided for in the proposed constitution is intended to relieve the supreme court of some of its appellate load and permit the supreme court greater discretion to sift judicial cases and concentrate on those involving more important questions. This and other features intended to increase the supreme court’s judicial and administrative supervision of the other courts would emphasize the supreme court’s role as head of a unified state judicial system. (CRC Analysis, No. 6, p 2)
As to the powers of the Supreme Court, the Analysis stated in pertinent part:
The supreme court retains unchanged its “general superintending control” over all courts and under its original jurisdiction the power to issue, hear and determine prerogative and remedial writs. Various changes have been made affecting the powers of the supreme court:
1. The court’s appellate jurisdiction would be specifically under its own control — “as provided by the rules of the supreme court.” (CRC Analysis, No. 6, p 3)
As to the Court of Appeals, the Analysis stated in pertinent part:
The new intermediate court of appeals, inferior only to the supreme court, would have nine judges, but this number could be increased by law.
Finally, in its 1963 publication, A Digest of the Proposed Constitution, the CRC noted:
The Judicial Branch
Considerable contention surrounded the judicial branch proposals. . . .
Underlying the final decisions was the concept of a unified court system — one court of justice divided into a four-tier system of constitutional courts, with a fifth tier of “courts of limited jurisdiction” permitted by a two-thirds vote of the legislature. (CRC Digest, p 15).
Interpreting the Constitutional provisions at stake in accordance with these two criteria — the common understanding of the electors and the circumstances surrounding the adoption of the Constitution — leads to the ineluctable conclusion that while the Legislature has the power to specify the scope of the Court of Appeals’ appellate jurisdiction, it does not have the power under the 1963 Constitution to add to or expand to the appellate jurisdiction of the Court of Appeals by combining it with a legislatively-created court of limited jurisdiction, an inferior trial-level court whose judgments and orders are subject to appellate review by the Court of Appeals, an intermediate appellate court.
The text of Article VI, § 1 makes this abundantly clear: there is “one court of justice which shall be divided into different courts, which have different judicial functions assigned to them. As the Supreme Court noted in Buback v Governor, 380 Mich 209, 226 (1968):
For the first time, the judicial article speaks of the judiciary in terms of one court of justice. That one court of justice is the judicial branch. The courts which make up the one court of justice do not exercise identical or corresponding jurisdiction. Each has its particular level of judicial administration.
Tellingly, there is no mention whatsoever in the 1963 Constitution of combining the Court of Appeals with a lower court. But if the 1963 Constitution wanted to allow the Legislature to combine the Court of Appeals with an inferior court, it certainly knew how to do it. See Giannotta v Governor, 71 Mich App 15, 18 (1976) (noting that “the Supreme Court has approved the interpretive method of comparing related provisions of the law in order to reach an understanding of what the drafters actually intended by their use or omission of terms“), citing Viculin v Dep’t of Civil Service, 386 Mich 775, 390-392 (1971) and Evans v US Rubber Co, 379 Mich 457, 460-463 (1967).
For example, Art 6, § 15 provides in pertinent part:
In each county organized for judicial purposes there shall be a probate court. The legislature may create or alter probate court districts or more than one county if approved in each affected county by a majority of the electors voting on the question. The Legislature may provide for the combination of the office of probate judge with any judicial office of limited jurisdiction within a county with supplemental salary as provided by law. The jurisdiction, powers and duties of the probate court and of the judges thereof shall be provided by law. . .
As the Court in Buback noted:
The Constitution of 1963 does not define the entire jurisdiction of probate courts. This responsibility is left to the Legislature by article, 6, § 15:
“The jurisdiction, powers and duties of the probate court and of the judges thereof shall be provided by law.”
The committee on style and drafting of the constitutional convention of 1961 made a distinction in the use of the words “prescribed by law” and the words “provided by law.” Where “provided by law” is used, it is intended that the legislature shall do the entire job of implementation. Where only the details were left to the legislature and not the overall planning, the committee used the words “prescribed by law.” See 2 Official Record, Constitutional Convention of 1961, pp 2673-2674.
The provision of the 1963 Constitution last quoted above placed the responsibility on the legislature to draft the law but did not grant authority for departure from the requirements and proscriptions of the Constitution. It does not have the effect of permitting disregard of the separation of powers article. [380 Mich at 226-227.]
The same is true here. Unlike probate courts, the Constitution made no provision for the Legislature to combine the Court of Appeals, or the functions of its judges with another judicial office of limited jurisdiction, as the Legislature did here with the enactment of 2013 PA 164, which incidentally provided for combining judicial offices but with no supplemental salary to the judges designated by the Supreme Court to serve concurrently two-year renewable terms as Court of Claims’ judges. Moreover, while the Constitution commanded the Legislature to implement the Court of Appeals’ appellate jurisdiction, see MCL 600.308, it did not provide that the Legislature could increase or expand that appellate jurisdiction to include the jurisdiction of a legislatively-created court with limited jurisdiction. In short, there is no authority in the Michigan Constitution permitting the Legislature to combine the Court of Appeals with the Court of Claims. Therefore, the Act violates the separation of powers article of the 1963 Michigan Constitution.
Further, under the doctrine of the separation of powers, the Legislative cannot encroach on or unduly burden or interfere with, the judicial department in the exercise of judicial functions. Thus, courts cannot be hampered or limited in the discharge of their functions by the legislative branch. See Michigan Civil Rights Com v Clark, 390 Mich 717 (1973); State Bar of Michigan v Galloway, 124 Mich App 271 (1983), aff’d 422 Mich 188 (1985); Gray v Hakenjos, 366 Mich 588 (1962). By adding to or expanding the appellate jurisdiction of the Court of Appeals, the Legislature is interfering with the Court of Appeals in the exercise of its appellate decision-making functions, removing four judges designated by the Supreme Court (as ordered to do so by the Legislature pursuant to the Act — another violation of the separation of powers doctrine) from full-time work as appellate judges — which the voters elected them to do — assigning them to work as well as unelected trial court judges on the Court of Claims.
Finally, Article VI, § 8 provides that “the supreme court may prescribe by rule that the court of appeals sit in divisions,” and that “Each such division shall consist of not fewer than three judges.” See Justice O’Hara’s dissenting opinion in In re Application of Governor, Jurisdiction of Court of Appeals, 381 Mich 1, 12 (1968)(no answer given by opinions released)(“We construe this section of the judicial article as some indication that judges of the appellate Court were not intended to sit individually as one-man grand jurors.”); See also Justice Adams’ opinion for denial of jurisdiction, 381 Mich at 16)(no answer given by opinions released)(“Lacking jurisdiction as a court, for any reason, over the suspected criminal offense, the judge may not proceed as a grand juror. The point is, it is the jurisdiction of the court that controls the power of a judge to proceed under the statute.”); (“Every grant of jurisdiction to the Court of Appeals, it is to be noted, is one of appellate or supervisory jurisdiction.”) (“It is beyond question that the purpose of the creation of the Court of Appeals was to create an intermediate appellate court to provide speedy, adequate, and final review of the majority of appeals of cases from the trial courts of this State. Because of the large number of such appeals, almost from the very inception of the present 9-man Court of Appeals, the Court has found itself without the necessary manpower to execute that mission.’) (“The Court of Appeals is without jurisdiction to entertain the application or designate one of its members as a grand juror.”).
Gary P. Supanich, PLLC
Special Report on Civil Service Commission Action Concerning Retiree Health Benefits
Background — On December 18, SERA Coordinating Council Chair Bob Kopasz testified before the Michigan Civil Service Commission concerning the Employment Relations Board’s Impasse Panel recommendation to put all active state employees in the New State Health Plan negotiated for state employees hired after April 1, 2010. The NSHP significantly raises co-pays, deductibles, co-insurance, and out-of-pocket maximum. Bob reminded the Commission that state retiree’s average income is $19,500 per year with a $300 maximum annual increase (active employees’ average income is $56,835 and a 2 percent wage increase for 10-1-14).
Bob expressed our concern that the proposed Impasse Panel recommendations, if applied to state retirees, will have a significant negative impact on the ability of retirees to afford their health care benefit.
Here is a summary of the proposed NSHP cost-sharing schedule:
Bob reminded the CSC that historically, non-represented state employees and state retiree health plans have tracked whatever the state employee unions have negotiated in their contracts. In the State Employees Retirement Act (Public Act 240 of 1943) Section 38. 20d, it states that insurance premiums for retirees “shall be in the same proportion of premium payable by the state of Michigan for the classified employees occupying positions in the state civil service.” However, there were exceptions made for prescription drug and other co-pays in 2008 for pre-1987 retirees. Those differences in co-pays were adopted by the CSC in a Memorandum of Understanding dated August 20, 2008 — with an effective date of October 1, 2008. So there was precedent for a different set of co-pays for some retirees than active state employees and these were determined long after active state employee benefits were adopted.
At the December 18 meeting, the CSC deadlocked on approving the Impasse Panel’s recommendations and tabled the matter until January 15. It urged the Office of the State Employer and the unions to negotiate some more and come to a resolution. We assumed that we would be meeting with the Office of the State Employer and Civil Service Commission Benefits staff in the coming months to exchange views on applying the NSHP to retirees.
January 15 CSC meeting — To our great surprise, we received the CSC’s proposed meeting agenda on Friday, January 10 and on it was an item labeled “Interagency Agreement – MOU [Memorandum of Understanding] Retiree Health Benefit.”
Bob acquired a copy of the MOU immediately and found it was already signed by Budget Director John Nixon. It proposed that state retirees be put into the NSHP with no modifications on October 1, 2014. Since Bob and his committee had not yet met with OSE or CSC staff, Bob called the Chair of the Commission Charles Wardrop, OSE Director Jan Winters, and Acting State Personnel Director Janet McClelland to request that the item be removed from the agenda since we had not yet had any joint meetings. Otherwise Bob would have to testify about past practice. There seemed to be agreement with our point of view. However, just in case, Bob prepared some testimony pointing out that the increases in the proposed MOU range from 66 percent to 400 percent!
At the Civil Service Commission meeting, Bob, Cheryl Streberger and Mary Pollock along with a standing room only crowd and media witnessed the MOU being removed from the agenda. Apparently there was a discussion in the CSC’s pre-meeting meeting and our viewpoint was heard!
On the proposed contracts, the Commission heard from the parties and a representative from the Department of Treasury concerning the reported $1.2 billion dollar surplus. Commissioner Robert Swanson then moved to approve the Impasse Panel recommendations with three key amendments. First, to make the contract one year instead of two; second, to keep the health care plan at status quo (which the unions wanted); and three, to remove the .5 percent one-time lump sum proposed for 10-1-14. What seemed like a perfect solution to us failed to garner three of the four possible Commission votes. A vote was then taken on approving the Impasse Panel proposal, which passed 3-1. Commissioner Swanson explained his Yes vote by saying a No vote and deadlock would leave the unions without a contract at all. He felt it was better for the unions to have a contract even if the benefits were not what they wanted. Commissioners Barrett and Wardrop voted Yes. Commissioner Blockett voted No.
We look forward to meeting with state officials concerning retiree health benefits over the coming weeks.
Bob sends his thanks to the 50 people who submitted their out-of-pocket health care expenses to him. He intends to draw from these in upcoming meetings with OSE and CSC staff to explain how severe these proposed out-of-pocket costs will be to state retirees and particularly lower-income state retirees. Over 20,000 state retirees have pensions below $1200 per month/$14,400 per year.
Michigan SERA Pens Agreement with VBS and APSA for SERA Membership Recruitment Program
On Tuesday, February 14, 2012, Michigan SERA Coordinating Council Chair Bob Kopasz signed an agreement with Voluntary Benefits Solutions (VBS) and the America’s Professional Services Association (APSA) to coordinate membership recruitment for SERA on a statewide basis. APSA will contact state employee retirees to offer them a one year free membership in SERA, which will now bring with it not only current SERA chapter programs such as meetings and newsletters, but numerous additional SERA Plus benefits provided through APSA. These include first-year free tax preparation and group discounts on services in the areas of estate planning, tax planning, home and auto insurance, financial services, mortgage services, estate transfer strategies, final settlement planning, and much more.
Recent state retiree and SERA member Cheryl Streberger will be the SERA Plus Program Manager. She will represent APSA with the Michigan SERA Coordinating Council and the 21 SERA Chapters. Some of her duties will include coordinating all SERA Plus marketing activities with all chapters, acting as a liaison between APSA leadership and SERA leadership, and handling any questions from local chapters and members of SERA. She will also make presentations about joining SERA at the Civil Service Pre-Retirement Orientation sessions. Learn more about Cheryl on the SERA Plus contact page.
APSA is a non-profit, non-partisan organization providing access to great discounts on services in many areas of retirement living.
The toll free number for state retirees and near retirees to access SERA Plus benefits through APSA is 855-SERA-PLUS (737-2758).
About Michigan SERA
SERA is an non-profit organization devoted exclusively to issues and concerns of all current and future retirees of the State of Michigan.
SERA works to:
SERA works through its members, leaders, and committees to promote the best interests of state employee retirees and future retirees. At least eight times since 1974, SERA was a moving force in pension increases or benefit improvements. In 2011, we opposed the pension tax and helped eliminate it for 70% of retirees; we opposed the remaining tax on public pensions for those born after 1945 in the Michigan Supreme Court. We opposed the recent state employee retirement system changes. That work continues.
SERA has 21 local chapters statewide that are linked through the Coordinating Council of the State Employee Retirees Associations of Michigan (the SERA Coordinating Council). SERA chapters have periodic meetings with guest speakers, opportunities for networking, newsletters, and other activities.
SERA welcomes the new ideas and energy of new members! To join, call 855-SERA-PLUS (737-2758).